The United Nations currently recognizes 180 currencies. For most of us, this is nothing more than some fun trivia. But if you’re responsible for sending payments in more than one of those currencies, a whole new set of payroll best practices comes into play.
Whether you’re sending money in euros or yen, paying international contractors or paying employees, the process doesn’t have to be complicated as your team grows. Below are four payroll best practices to make international payments a simple, consistent, reliable experience for those on the sending and receiving end.
Implement a Uniform Process
The words “uniform” and “international payments” don’t typically go hand-in-hand. However, with the right approach and the right technology, this payroll best practice will reduce the time you spend on payments from hours to minutes. It’ll reduce your costs, too.
Does this scenario sound familiar? Maybe your team started out small and based solely in the U.S. Over time, the business grew and so did your team of employees and contractors. Now, you have a global network of talented people responsible for your company’s success. It’s an exciting milestone for any business, but it also shakes up the payroll process you once had down to a science. If your new reality involves different banks, different payment processors, and a variety of hefty wire fees, you’re not alone.
A lot of banks charge international wire fees for both the sender and the receiver. Here’s a chart that breaks down the fees for the biggest financial institutions in the U.S. Those fees can be as high as $50 USD to send a single international wire transfer and $25 to receive one. Now, imagine you’re paying five contractors once a month for a year. That’s $3,000 a year for you and $300 a year for each contractor. If you were a contractor in high demand, would you want to work with a company where each payment came with fees?
And for finance and HR teams, using multiple bank and payment process platforms creates hours of manual work. Some responsibilities can’t be simplified or automated, but, thankfully, this isn’t one of them. A uniform process means more time to focus on those other to-dos that require more time and attention.
The good news is, those fees are avoidable with the right approach. When everything is streamlined through Pilot’s platform, there’s no need to juggle different payment processors and banks, and there are no international wire fees. This leads to time saved and more money in the pockets of your workers... and your business, too.
Pay Everyone on Time
Of course, you’d never intentionally pay your team late, but the nuances of international payments can sometimes cause this unfortunate (yet avoidable) outcome.
If you’re using different platforms and processes, your employees in the U.S. are probably still getting paid every two weeks as planned. But your global team of contractors never quite knows when to expect payments. Unpredictable payment timelines are an all-too-common challenge for this group of workers.
In a survey from Bill.com of more than 1,400 contractors and freelancers, 45% reported not being paid on time. Chasing those payments takes up time, too. According to The Association of Independent Professionals and the Self-Employed (IPSE), a UK-based membership organization for self-employed workers, freelancers estimated losing 20 days a year pursuing delayed payments, and 43% of those surveyed gave up on chasing those payments one or more times. This payroll best practice ensures your global contractors aren’t part of this statistic. It also helps build up your reputation as a great company for contract workers.
The key here is to automate the process as much as possible while at the same time providing transparency to your contractors. Pilot lets you schedule once and let the platform do the rest. We recommend setting up monthly payments to contractors. Plus, contractors have control of payment details and a view into the status of their payments. The result is payment peace of mind for everyone.
Plenty of things in life are unpredictable — especially in the life of a contractor. Following this payment best practice will ensure getting paid isn’t one of them.
Approach Contractor and Employee Payments the Same Way
Odds are, your employees are paid through direct deposit, but do your contractors benefit from the same simple process? They could and probably should. You likely never thought much about the downside of e-wallets, but they can be a headache for those who use them. When a payment is due to a contractor, a company puts the funds into the e-wallet. The money sits in the contractor’s account until they go in and transfer it to their own bank account, or, if available, use the money through the e-wallet’s debit card.
Imagine if you required your full-time U.S. employees to get paid through an e-wallet. This is an added hurdle and typically results in money lost to e-wallet transaction fees. Wouldn’t you expect a lot of frustration and push-back? You rely on your international contractors for valuable work that helps your business succeed. But when they’re relying on an e-wallet to receive payments, it adds that extra step to the process and those transfer and withdrawal fees (from the wallet and/or debit card, and from the bank, in some cases). Domestic W-2 employees don’t expect these kinds of fees, so why should your contractors?
The problem with e-wallets isn’t just about creating extra work. Different countries have different e-wallets. As of 2018, there were 27 e-wallet providers in Singapore and 40 in Malaysia alone. That makes choosing the right ones complicated. Depending on how dispersed your team is, finding a single e-wallet to pay everyone might be near impossible.
Delays are also an expected part of transferring from a digital wallet to a bank account. PayPal, for example, charges a fee for instant payments, while standard transfers can take up to five business days. When you don’t use e-wallets and pay your contractors and employees the same way (directly to their bank accounts), all of this is avoided.
Pilot makes this simple by sending local currency payments in over 70 countries straight to the bank accounts of your contractors, entirely avoiding the wait time and withdrawal fees of an e-wallet.
Prioritize Security and Compliance
For HR and finance teams, compliance is often front and center. This is especially true with payments. Whether you’re managing payments in one location or across different countries, you need to make sure your company’s data and the data of your team members stay safe.
Payment security is one of those things most of us think very little about — until it impacts us directly. According to Risk Based Security’s 2020 Year End Report on data breaches, there were 3,932 breaches reported in 2020, with 37 million exposed records last year. The takeaway? Data security is serious business for everyone involved.
Data security is something to take seriously, even if you only manage payments for team members in a single country. It’s even more important when you’re managing international payments. Imagine your team has a different process for sending payments in each country where you have employees or contractors. Do you have the resources (both time and knowledge) to prioritize security for each of them? Unless you have a large team responsible specifically for this, the answer is probably “no.”
So, how do you achieve this payment best practice if you don’t have the bandwidth and in-house talent to carefully assess security for each platform? By moving all payments to a single platform that already prioritizes strict security and compliance procedures. Pilot is SOC 2 compliant. That means, when you manage all of your international payments on the Pilot platform, you get multi-layered security protocols built right in.
Following Payroll Best Practices Doesn’t Have to Be Complicated
There are plenty of challenges to overcome as your team of employees and contractors grows from local to international. Following payroll best practices no matter how dispersed your workforce is doesn’t have to be one of them. Investing in the right payment processes and technology quickly pays off for everyone involved, from cost and time savings to critical security safeguards.
Making payroll best practices easy to follow is at the heart of what Pilot does. To learn more about how we can help you simplify your payments no matter where you do business, request a demo with one of our experts.
⚖️ Legal Disclaimer: The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
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